Nos. 19-1343, 19-1381

IN THE

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

GUARDIAN FLIGHT, LLC,

Plaintiff-Appellant/Cross-Appellee,

v.

JON GODFREAD, in his capacity as North Dakota Insurance Commissioner; WAYNE STENEHJEM, in his capacity as North Dakota Attorney General,

Defendants-Appellees/Cross-Appellants.

On Appeal from the United States District Court for District of North Dakota

District Court No. 1:18-cv-007

BRIEF OF AMERICA’S HEALTH INSURANCE PLANS AS AMICUS

CURIAE IN SUPPORT OF APPELLEES/CROSS-APPELLANTS

Julie Simon Miller Thomas M. Palumbo AMERICA’S HEALTH INSURANCE PLANS 601 Pennsylvania Ave. NW South Building, Suite 500 Washington, DC 20004

Hyland Hunt Ruthanne M. Deutsch DEUTSCH HUNT PLLC 300 New Jersey Ave. NW Suite 900 Washington, DC 20001 Tel.: 202-868-6915 Fax: 202-609-8410 Email: hhunt@deutschhunt.com

Attorneys for Amicus Curiae America’s Health Insurance Plans

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CORPORATE DISCLOSURE STATEMENT

Under Rule 26.1 of the Federal Rules of Appellate Procedure, amicus curiae

America’s Health Insurance Plans, Inc. (AHIP) submits the following corporate

disclosure statement:

AHIP has no parent corporation and no publicly-traded company holds 10%

or more of AHIP’s stock. AHIP is a trade association whose members have no

ownership interests.

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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT .......................................................... i 

TABLE OF AUTHORITIES ................................................................................... iii 

STATEMENT OF INTEREST OF AMICUS CURIAE ............................................. 1 

INTRODUCTION AND SUMMARY OF ARGUMENT ........................................ 2 

ARGUMENT ............................................................................................................. 7 

State Regulation Is Needed To Enhance Insurance Providers’ Ability To Protect Consumers From High Costs And Better Facilitate Access To Air Ambulance Services. .................................................................................................. 7 

A.  Air Ambulances Presently Operate in a Regulatory Vacuum. ................... 8 

1.  Competitive forces do not meaningfully constrain air ambulance pricing. ............................................................................. 8 

2.  Virtually all state efforts to regulate any aspect of insurance touching on air ambulances have been rebuffed. ............................. 12 

B.  The Regulatory Vacuum Has Resulted in Unconstrained Air Ambulance Pricing and Consumer Harm ................................................ 14 

1.  Air ambulance providers have largely refused to participate in health plan networks. ........................................................................ 15 

2.  The ability to send surprise medical bills and the lack of pricing transparency tip the scales of post-service negotiations in favor of exceptionally high bills for air ambulance services. .................... 21 

3.  Air ambulances’ refusal to participate in networks and heightened post-service leverage has resulted in skyrocketing costs for insurance providers and consumers. ................................. 24 

CONCLUSION ........................................................................................................ 29 

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE

iii

TABLE OF AUTHORITIES

CASES......................................................................................................................Page(s)

Frye v. Kansas City Missouri Police Dept., 375 F.3d 785 (8th Cir. 2004)) ............ 14

Rowe v. N.H. Motor Transp. Ass’n, 552 U.S. 364 (2008) ....................................... 11

Valley Med Flight, Inc. v. Dwelle, 171 F. Supp. 3d 930 (D.N.D. 2016) .......... 12, 22

STATUTES

Airline Deregulation Act of 1978, Pub. L. No. 95-504, § 3, 92 Stat. 1705 ............. 11

FAA Reauthorization Act of 2018, Pub. L. No. 115-254

§ 418(a) ................................................................................................................. 13

§ 418(b)(3)(B) ....................................................................................................... 13

§ 418(d)(3) ............................................................................................................ 13

42 U.S.C.

§ 18022(b)(1)(B) ................................................................................................... 18

§ 18031(c)(1)(B) ................................................................................................... 16

N.D.C.C. § 26.1-47-09(3) ................................................................................... 3, 34

REGULATIONS

45 C.F.R. 147.138(b)(3)(i)(A) ................................................................................. 22

OTHER AUTHORITIES

AHIP, Center for Policy and Research, Charges Billed by Out-of-Network Providers: Implications for Affordability (Sept. 2015) ................................. 16, 21

AHIP, State Policy Issue Brief: Air Ambulance Services (2016) ................. 9, 20, 26

AHIP, What’s the Role of Networks in Providing High-Quality Affordable Care? .................................................................................................. 16

ConsumersUnion, Up in the Air: Inadequate Regulation for Emergency Air Ambulance Transportation (Mar. 2017) ................................................................ 9

Peter Eavis, Air Ambulances Offer a Lifeline, and Then a Sky-High Bill, N.Y. TIMES (May 5, 2015) ..................................................................................... 24, 27

iv

Cindy Galli et al., Sky-Rage: Bills, Debt, Lawsuits Follow Helicopter Medevac Trips, ABC NEWS (Mar. 16, 2016) ................................................................ 25, 27

Sarah Gantz, Sky high air ambulance bills leave patients seeking relief, BALT. BUS. J. (Aug. 28, 2015) ................................................................................................. 24

Kaiser Family Foundation, Private Insurance: Surprise Medical Bills (Mar. 2016) ........................................................................................................... 21

Alison Kodjak, Taken for a Ride, NPR (Sept. 25, 2018) ......................................... 26

Md. Health Care Comm'n, Air Ambulance Study Required Under Senate Bill 770 (Dec. 2006) .................................................................................................... 17, 20

Mo. Dep’t of Ins., Fin. Institutions & Prof. Registration, Policy Brief: Health Coverage for Air Ambulance Transport .................................................. 10, 20, 27

Mont. State Leg., Final Report of the 2015-2016 Economic Affairs Interim Committee (May 2017) ................................................................................. 26, 27

N.M. Office of Superintendent of Ins., Air Ambulance Memorial: Study Report (Jan. 2017) ............................................................................................................ 25

Nat’l Conference of Ins. Legislators, Air Ambulance Task Force, Draft Minutes (July 15, 2017) ............................................................................................... 11, 22

Nat’l Conference of State Legislators, Insurance Carriers and Access to Healthcare Providers: Network Adequacy (Nov. 2015) ...................................... 16

Eric S. Peterson & Brian Maffly, Sky’s the Limit for What Utah Air Ambulances Can Charge—Like the $46K Bill This Man Received for a 50-mile Trip, SALT

LAKE TRIB. (Aug. 29, 2016) ................................................................................. 27

PHI, Inc., Annual Report (Form 10-K) (Feb. 23, 2018) .......................................... 18

Patrick A. Rivers & Saundra H. Glover, Health care competition, strategic mission, and patient satisfaction: research model and propositions, 22 J. HEALTH ORGANIZATION MGMT. 627 (2008) ........................................................ 16

U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-10-907, AIR AMBULANCE: EFFECTS OF

INDUSTRY CHANGES ON SERVICES ARE UNCLEAR (2010) .................................... 18

U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-17-637, AIR AMBULANCE: DATA

COLLECTION AND TRANSPARENCY NEEDED TO ENHANCE DOT OVERSIGHT (2017) ............................................................................................................ passim

U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-19-292, AIR AMBULANCE: AVAILABLE DATA SHOW PRIVATELY-INSURED PATIENTS ARE AT FINANCIAL RISK 7 (2019) ......................................................................................................... passim

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STATEMENT OF INTEREST OF AMICUS CURIAE1

America’s Health Insurance Plans (AHIP) is the national trade association

representing the health insurance provider community. AHIP advocates for public

policies that expand affordable health care coverage to all Americans through a

competitive marketplace that fosters choice, quality, and innovation. Along with its

predecessors, AHIP has more than 60 years of experience in the industry. AHIP’s

members provide health care coverage and other financial health and wellness

benefits through employer-provided coverage, the individual insurance market, and

public programs such as Medicare and Medicaid. As a result, AHIP’s members

have broad experience working with a variety of stakeholders to ensure that

patients have access to needed treatments and medical services at affordable prices.

Those stakeholders include hospitals, physicians, clinics and laboratories, medical

transportation providers like ground ambulances and air ambulances, patients,

employers, state governments, the federal government, and pharmaceutical and

device companies.

AHIP writes to explain to the Court the adverse effects that result from air

ambulance providers operating in a regulatory vacuum—a vacuum created by

overly expansive interpretations of the Airline Deregulation Act to preempt

1 No counsel for any party authored this brief in whole or in part, and no person or entity other than the amicus, its members, or its counsel made a monetary contribution intended to fund the brief’s preparation or submission. All parties have consented to the filing of this brief. See Fed. R. App. P. 29(a)(2), (4).

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virtually all state regulations touching on air ambulance services. The resulting

inability of States to exercise even minimal oversight over insurance coverage for

air ambulances, much less the same oversight States exercise for other emergency

medical providers, allows air ambulance providers—who deliver essential

emergency medical services to patients who have no choice—to uncompetitively

price gouge health care consumers and insurance providers alike. Such

anticompetitive behavior increases the cost of life-saving services and threatens

patients’ ability to obtain affordable care and coverage.

INTRODUCTION AND SUMMARY OF ARGUMENT

To help understand the consumer harm caused by the absence of any

meaningful regulatory oversight to ensure fair and reasonable pricing for air

ambulance services, consider this scenario.

Imagine a person driving home from work in Grand Forks is seriously

injured in a car accident and rendered unconscious. Paramedics arrive on the scene,

and within minutes call for an air ambulance to airlift her to a hospital. Their

immediate priority is to stabilize the patient and to get her to a location that can

provide urgently needed medical care. They do not know—and should not care—

whether she has insurance, what her health plan is, or whether the air ambulance

provider is in her health plan’s network. She is airlifted to the hospital and,

happily, recovers. Although the air ambulance provider was not in-network, her

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insurance covers the service, compensating the air ambulance at a rate far above

what the insurance provider considers fair and reasonable or what it would have

negotiated ex ante if it had been able to do so. Even still, the patient receives a

surprise medical bill (a practice often referred to as “balance billing”) for the

portion of the fee not covered by insurance. This bill from the air ambulance

provider is for tens of thousands of dollars, even though her insurance company

had already paid more than would be paid to an in-network provider.

Now imagine, instead, that the patient’s health insurance contract includes

the claims settlement provision required by the North Dakota statute at issue here,

deeming her insurance provider’s payment to be an in-network payment. See

N.D.C.C. § 26.1-47-09(3). She is still airlifted, and still recovers. But this time

around she is not crippled financially after she recovers physically. The air

ambulance still receives reasonable payment for its services, and likely at a rate

that exceeds its costs and is far higher than it would receive from Medicare,

Medicaid, or any other payer. But there is no surprise medical bill confronting the

patient. The patient’s insurance works as she anticipated in avoiding risk, and she

is not forced to grapple with thousands of dollars of medical debt while she

recovers from her life-threatening injuries.

The second version of this story has a happier ending; the first,

unfortunately, is far more common. The simple truth is that given the emergency

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nature of air ambulance services, market forces alone cannot protect consumers

from price gouging. In most if not all cases, when the need (i.e., the demand) for

air ambulance transport arises, a patient has little or no control over their choice of

care, including the air ambulance provider. In other words, the demand for air

ambulance services is inherently inelastic—a patient will require the service

regardless of the cost and almost always without an opportunity to provide input,

consent or review options (if any may even exist). As a result, air ambulance

providers are not subject to any manner of price competition that one would

normally expect or encounter in a competitive market. This inherent lack of

competitive constraints is worsened by consolidation in the industry, which is

increasingly dominated by a handful of large providers and characterized by

regional or local markets susceptible to monopolization.

Regulation is required to restore balance and fairness to this marketplace.

Yet, for air ambulances, such oversight efforts have been rebuffed at every turn

due to expansive readings of the preemptive scope of the Airline Deregulation Act

and parsimonious interpretations of state authority to regulate insurance under the

McCarran-Ferguson Act. Although a federal effort to study the issue has begun, it

is in its infancy and even as it considers federal actions, expressly contemplates a

continued regulatory role for the States. This Court should likewise recognize state

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authority here, or North Dakota consumers will be unable to fully insure against

unconstrained and unfair air ambulance charges.

Air ambulances, like other emergency medical services, are generally

covered by health insurance, but the absence of state regulation has impaired health

insurance providers’ ability to constrain air ambulance pricing, by fostering low

participation of air ambulance providers in insurance networks. Health insurance

providers strive to offer value to consumers by arranging comprehensive yet

affordable networks of medical providers for enrollees to choose from, with pre-

negotiated payments. But this mechanism for ensuring fair and reasonable

compensation to medical providers (and avoiding unanticipated costs to those who

purchase insurance for just that reason) has broken down for air ambulances. This

is largely because air ambulance providers currently operate outside of the kinds of

state oversight applicable to all other emergency medical providers.

For other emergency medical providers, States have an array of tools to

ensure reasonable provider compensation, while avoiding unfair, excessive charges

to patients (and their health plans). And this system works even when the provider

is outside of the health plan’s network. States can, for example, increase the

transparency of costs and charges or protect consumers from being sent sky high

surprise medical bills after their insurance company has already paid more than a

reasonable rate. Because these tools constrain out-of-network emergency-service

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pricing, emergency providers have an incentive to negotiate pricing with health

insurance providers directly by entering plan networks—reaching mutual

agreement on a predictable (and reasonable) payment schedule before services are

rendered.

For air ambulances, however, the absence of state oversight, combined with

the structure of the market, yields wholly unconstrained and often exorbitant

charges. Operating outside of any state frameworks designed to ensure

transparency and promote reasonable out-of-network charges, air ambulances have

little incentive to join plan networks, preferring to bill, after the fact, whatever

amount they choose. The regulatory vacuum also means that there is little

information about the relationship between air ambulance providers’ actual costs

and the amount they bill, because they are not required to disclose costs. And the

prospect of air ambulances sending surprise medical bills to insurance providers’

enrollees in amounts that may reach into the tens of thousands of dollars likewise

gives air ambulances unwarranted leverage in negotiations with insurance

providers.

The combined upshot of all these factors—an absence of state oversight, a

lack of competition and traditional market-driven price restraints, a lack of

transparency, and air ambulance providers’ ability to send surprise medical bills to

patients—is a skewed market that allows air ambulance providers to extract

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payment of unreasonably high charges from insurance providers and still saddle

patients with thousands of dollars of medical debt, despite their attempts to insure

against precisely such risks. The end result is higher premiums for everyone who

purchases coverage, regardless of whether or not they ever receive emergency

medical care from an air ambulance. These harms persist largely because overly

expansive preemption rulings have prevented the States—the primary regulators of

insurance—from enforcing sensible policies designed to reign in otherwise out of

control, ever-escalating and anticompetitive air ambulance provider billed charges.

This is antithetical to the purpose and intent of both the Airline Deregulation Act

and the McCarran-Ferguson Act, and we encourage the Court to use this unique

opportunity to affirm the States’ traditional regulatory role regarding critical

emergency medical services.

ARGUMENT

State Regulation Is Needed To Enhance Insurance Providers’ Ability To Protect Consumers From High Costs And Better Facilitate Access To Air Ambulance Services.

As North Dakota argues, its law mandating that health insurance contracts

include terms requiring payments to air ambulance providers to be treated as “in-

network” payments satisfies the requirements for reverse preemption under the

McCarran-Ferguson Act, and is not preempted by the Airline Deregulation Act.

See N.D. Br. 24-25, 33-36, 38-43. AHIP concurs, and writes separately to explain

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the serious harm suffered by consumers, and the inability of insurance markets to

function effectively, when air ambulance providers operate in a regulatory

vacuum—as they do now. Given the nature of air ambulance services, market

forces alone cannot constrain them. And the efforts of States like North Dakota to

establish even the slightest regulatory guidelines touching on air ambulance

services—such as pricing transparency—have been stymied by air ambulance

providers at every turn.

In this regulation-free environment, the federal study tasked with examining

potential solutions is a welcome development. But it does not obviate the critical

need for state regulation, consistent with States’ long-standing authority to regulate

the business of insurance and the delivery of medical services. And States must try

to do everything they can to protect their citizens from suffering serious harm

caused by current air ambulance provider practices.

A. Air Ambulances Presently Operate in a Regulatory Vacuum.

1. Competitive forces do not meaningfully constrain air ambulance pricing.

As the district court found, air ambulance prices “surely are out of control.”

JA 99. And they will remain unchecked without regulation. Market forces cannot

meaningfully constrain air ambulance pricing for several reasons. First, patients in

need of emergency care cannot, and do not, choose whether to take an air

ambulance based on price. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-17-637,

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AIR AMBULANCE: DATA COLLECTION AND TRANSPARENCY NEEDED TO ENHANCE

DOT OVERSIGHT 18 (2017) (“2017 GAO Report”).2 Instead, medical professionals

decide when to order an air ambulance, based on medical necessity, typically in

two scenarios. Id. at 4-5. The first occurs when emergency responders determine

that a patient needs air ambulance transport from the scene of an accident to a

hospital. Id. The second occurs when hospital doctors decide that a patient urgently

requires care at a higher-level facility that must be reached within the shorter

timeframe made possible only by air transport. Id.

In both cases, demand is inelastic—a patient in critical need of emergency

air transport cannot opt out if the price is too high. Id. at 18. And although air

ambulances have expanded the areas they serve, the lack of competitive constraints

is still exacerbated in rural, remote, or otherwise underserved areas, where air

ambulance transport is often most crucial. AHIP, State Policy Issue Brief: Air

Ambulance Services, at 2 (2016) (“AHIP Issue Brief”)3; ConsumersUnion, Up in

the Air: Inadequate Regulation for Emergency Air Ambulance Transportation, at 2

(Mar. 2017) (describing how closures of rural hospitals have increased need for air

ambulances in rural areas).4 Increased capacity, moreover, is no guarantee of

2 Available at https://www.gao.gov/assets/690/686167.pdf. 3 Available at https://www.ahip.org/wp-content/uploads/2018/01/AHIP-Air-Ambulance-Issue-Brief-10-24-16-FINAL.pdf. 4 Available at http://consumersunion.org/wp-content/uploads/2017/04/Up-In-The-Air-Inadequate-Regulation-for-Emergency-Air-Ambulance-Transportation.pdf.

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increased competition or lower prices. In fact, the GAO found that three large, for-

profit operators dominate the industry, and prices have soared as the industry

consolidated. 2017 GAO Report at 6, 11. In addition, many areas have only one

provider, creating a localized monopoly. Mo. Dep’t of Ins., Fin. Institutions &

Prof. Registration, Policy Brief: Health Coverage for Air Ambulance Transport, at

7 (“Missouri Report”).5

Second, patients are in no position to choose among competing air

ambulance providers based on which provider is in-network for their health plan.

Instead, first responders or physicians select air ambulance providers based on

proximity or established relationships, generally without consideration of the

patient’s insurance plan. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-19-292, AIR

AMBULANCE: AVAILABLE DATA SHOW PRIVATELY-INSURED PATIENTS ARE AT

FINANCIAL RISK 7 (2019) (“2019 GAO Report”).6

Finally, air ambulance pricing is opaque. So even if opting out were

possible, a patient would lack the information needed to wisely comparison shop.

Even medical providers ordering an air ambulance—and health insurance

providers that foot the bill—are usually unaware of what the air ambulance

provider’s fee will be when the call is made to dispatch one, and they may never

5 Available at https://insurance.mo.gov/reports/documents/TheAirAmbulance CoverageGap2019ANAnnotations.pdf. 6 Available at https://www.gao.gov/assets/700/697684.pdf.

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know its costs. See 2017 GAO Report at 19-20; Nat’l Conference of Ins.

Legislators, Air Ambulance Task Force, Draft Minutes, at 2 (July 15, 2017)

(“NCOIL Minutes”) (statement by representative of air ambulance provider noting

that “the data to inform stakeholders about the true costs associated with providing

air medical services is extremely limited and there is no publicly available standard

cost data of air ambulance providers nationwide”).7

These market dynamics could not be more different from the market for

airline travel, where airlines compete aggressively based on transparent prices, and

travelers can easily choose to skip or reschedule a trip if the fares are too costly.

An expansive reading of the Airline Deregulation Act’s preemptive sweep thus

yields very different results for air ambulances than for airlines. Instead of the

“lower airline fares and better airline service” secured for airlines, Rowe v. N.H.

Motor Transp. Ass’n, 552 U.S. 364, 367-368 (2008), applying market-driven

commercial airline preemption rules to emergency-air-transport services has meant

less competition and soaring prices for air ambulances. As a result, the Airline

Deregulation Act, a statute designed to promote competition among airlines and

benefit consumers,8 has instead been used by air ambulance providers as a sword to

7 Available at http://ncoil.org/wp-content/uploads/2017/08/air-ambulance-minutes-chicago-final-7-25-17.pdf. 8 See Airline Deregulation Act of 1978, Pub. L. No. 95-504, § 3, 92 Stat. 1705, 1706 (declaring congressional policy to place “maximum reliance on competitive

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prevent States from fostering competition in the very different market for

emergency medical services.

2. Virtually all state efforts to regulate any aspect of insurance touching on air ambulances have been rebuffed.

With respect to insurance coverage for their services, air ambulances

presently operate in a virtually regulation-free zone. This case is North Dakota’s

second attempt to address issues related to air ambulance services. In 2015, North

Dakota passed a law requiring its emergency dispatchers to give first priority to air

ambulance providers that had entered into contract agreements with insurance

providers covering the majority of the state, which would have encouraged greater

network participation and reduced the number of North Dakotans subject to

exorbitant out-of-network surprise medical bills. See Valley Med Flight, Inc. v.

Dwelle, 171 F. Supp. 3d 930, 936-37 (D.N.D. 2016). Concluding that the law

effectively required air ambulance providers to enter into a contract with a

particular insurance provider, the court found the law preempted by the Airline

Deregulation Act. Id. at 941-42. A law that would have required air ambulance

providers to make their fee schedules public upon request was also invalidated. Id.

at 942. Although these regulations were designed to incentivize (but not require)

network participation and to foster transparency—and thereby promote more

market forces and on actual and potential competition” in the air transportation system).

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effective markets—they were nonetheless held preempted by a law meant to spur

competition. This result demonstrates both the extent of the paradoxical regulatory

vacuum in which air ambulances operate, and the critical need for some regulatory

guardrails.

In 2018, the federal government entered the fray. The FAA Reauthorization

Act of 2018, Pub. L. No. 115-254, § 418(a), requires the Department of

Transportation to form an advisory committee to review options for improving

transparency surrounding air ambulance services and protecting consumers from

surprise bills. This work is just beginning. And a federal advisory committee’s

solicitation of studies and proposals hardly means that the States have no role to

play. On the contrary, the Act requires the participation of state insurance

regulators in the federal advisory committee, id. § 418(b)(3)(B), and expressly

contemplates recommendations for the “prevention of balance billing to

consumers,” including by identifying steps that can be taken by States “consistent

with current legal authorities regarding consumer protection,” id. § 418(d)(3).

This incipient federal initiative expressly contemplates state participation for

good reason. Our federal system does not lightly assume that federal regulatory

activity precludes the exercise of state authority. Instead, it is premised on a system

of cooperative federalism, where both levels of government work hand-in-hand to

promote citizen welfare, particularly in areas like the regulation of health insurance

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where the States are in the heartland of their traditional police powers. See Frye v.

Kansas City Missouri Police Dept., 375 F.3d 785, 791 (8th Cir. 2004) (quoting Hill

v. Colorado, 530 U.S. 703, 715, (2000)) (“It is a traditional exercise of the State's

‘police powers to protect the health and safety of their citizens.’”). It is incumbent

on States to continue exercising their rightful authority—including insurance

regulations that touch on air ambulance providers—to fully address the current

regulatory vacuum and the resulting harms to public health and welfare.

B. The Regulatory Vacuum Has Resulted in Unconstrained Air Ambulance Pricing and Consumer Harm

Air ambulances are not the only emergency medical services where the most

vulnerable patients can neither comparison shop, nor turn down out-of-network

providers. But other emergency services, like ground ambulances and emergency

room care, do not share the extraordinarily high, uncontrolled pricing of air

ambulances. Why? For other emergency services, state regulations foster

transparency and otherwise shape the marketplace in ways that encourage

providers to join insurance networks—perhaps the most common way of ensuring

reasonable fees for emergency providers. But because of the regulatory vacuum

created by overly expansive readings of the Airline Deregulation Act’s preemption

provision, air ambulances have little incentive to join insurance networks and have

generally refused to do so. Instead, left unchecked by any regulatory safeguards,

air ambulance providers send exorbitant bills to insurance providers and patients

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alike after their lifesaving services have been rendered.

Health insurance providers—who strive to protect their enrollees from

receiving huge surprise medical bills—often have little choice but to accept or

otherwise negotiate from air ambulance providers’ unreasonable post-service

payment demands. This dynamic is compounded by a distinct informational

disadvantage due to an acute lack of transparency surrounding air ambulance

provider pricing. As a result, health insurance providers (as well as both regulators

and patients) oftentimes lack an air ambulance providers’ underlying cost

information. This paucity of supporting cost data prevents the billed party from

being able to make an informed determination about whether an air ambulance

provider’s billed charge is reasonable. This information imbalance benefits air

ambulance providers, whose receipts often far exceed any reasonable

approximation of their costs—at least as far as the limited data available indicate.

And this problem will only get worse if States continue to be stymied in their

attempts to address the structural problem of unconstrained air ambulance pricing.

1. Air ambulance providers have largely refused to participate in health plan networks.

For most medical services, payments are generally set in advance by

negotiation of rates between insurance providers and health care providers,

whereby health plans develop provider networks that offer consumers and

employers access to affordable, high-quality care. See AHIP, Center for Policy and

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Research, Charges Billed by Out-of-Network Providers: Implications for

Affordability, at 3 (Sept. 2015) (“AHIP Out-Of-Network Report”).9 The adequacy

of a plan’s provider networks must meet federal and/or state standards. See, e.g.,

42 U.S.C. § 18031(c)(1)(B) (requiring Secretary of Health and Human services to

set network-adequacy standards for certification as a “qualified health plan”); Nat’l

Conference of State Legislators, Insurance Carriers and Access to Healthcare

Providers: Network Adequacy (Nov. 2015) (surveying state laws).10

Such networks benefit consumers and the entire health care system by

reducing costs, promoting access to and utilization of services, and providing high-

quality choices for enrollees. See AHIP, What’s the Role of Networks in Providing

High-Quality Affordable Care?11; Patrick A. Rivers & Saundra H. Glover, Health

care competition, strategic mission, and patient satisfaction: research model and

propositions, 22 J. HEALTH ORGANIZATION MGMT. 627 (2008) (describing how

providers compete for inclusion in networks, which reduces costs and improves

quality). Networks operate to reduce costs for consumers because insurance

providers negotiate payments with providers up front, avoid the inefficiencies of

negotiating every bill, and verify the credentials of the providers for their enrollees.

9 Available at https://www.ahip.org/wp-content/uploads/2015/09/ OON_Report_11.3.16.pdf. 10 Available at http://www.ncsl.org/research/health/insurance-carriers-and-access-to-healthcare-providers-network-adequacy.aspx. 11 Available at https://www.ahip.org/issues/provider-networks/.

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The resulting contracts, moreover, generally prohibit surprise bills from in-network

providers and thereby limit consumers’ exposure to out-of-pocket costs. See 2019

GAO Report at 7; 2017 GAO Report at 7-8.

Health insurance providers have tried to take the same approach to air

ambulance services—seeking to contain costs and limit patient out-of-pocket

expenses by including air ambulance services in plan networks, while still

appropriately compensating air ambulance providers with rates exceeding other

payment sources (e.g., Medicare, Medicaid, and others). But such efforts have been

largely unsuccessful, and network participation rates remain low. See 2019 GAO

Report at 16 (reporting national data indicating only 31% of air ambulance

transports were in-network in 2017); Md. Health Care Comm’n, Air Ambulance

Study Required Under Senate Bill 770, at 2-3 (Dec. 2006) (“MHCC Report”)

(overall share of in-network air ambulance missions fell from 47% in 2004 to 27%

in 2005)12; 2017 GAO Report at 18 (representatives from three large independent

air ambulance providers noted that they do not generally contract with insurance

providers, with one stating that the company has contracts with fewer than 10 of

the approximate 1,000 private insurance payers it works with per year, or around

1%). At 69% in 2017, the out-of-network rate for air ambulance transports far

exceeds the rates for other emergency services. 2019 GAO Report at 16-17

12 Available at http://dlslibrary.state.md.us/publications/EXEC/DHMH/MHCC/ AirAmbulance_2006.pdf.

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(reporting 51% of ground ambulance transports and 22% of emergency room

physician services were out of network, with transports provided by municipal

agencies explaining much of the out-of-network rate for ground ambulances).

The inability to negotiate network rates ahead of time doesn’t mean,

however, that health insurance providers can refuse to cover the service.13 It

means only that they must pay more, when the unpredictable and unconstrained

bills finally arrive, and often more than their fair share. Private insurance providers

cover only about a third of total air ambulance patient transports across the

country, but provide the lion’s share of payments, as much as three quarters of

revenues for the largest national air ambulance providers. 2017 GAO Report at 14;

PHI, Inc., Annual Report (Form 10-K) 56 (Feb. 23, 2018) (reporting private

insurance accounted for 72% of revenue).14 This mismatch between patient volume

and revenues occurs because commercial health insurance providers typically

reimburse air ambulances at higher rates than other payment sources (like

Medicare), often because they are reluctant to expose their plan participants to

surprise medical bills. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-10-907, AIR

AMBULANCE: EFFECTS OF INDUSTRY CHANGES ON SERVICES ARE UNCLEAR 5

13 Covering air ambulances is generally mandatory for plans subject to the Affordable Care Act’s rules regarding essential health benefits. See 42 U.S.C. § 18022(b)(1)(B) (requiring coverage of “emergency services”). 14 Available at http://www.phihelico.com/docs/Investor%20Relations/2017/ 2017%20Annual%20Report.pdf.

19

(2010). The following chart prepared by the GAO illustrates the range of payments

made by private insurance compared to other payers, and demonstrates that private

insurance providers (and their enrollees) are paying far more than their fair share

for air ambulance services:

2017 GAO Report at 14.

For the most part, these higher payments from private insurance providers

(and their enrollees, the patients) are extracted through post-service negotiations.

But when insurance providers can negotiate contracts with air ambulance providers

ex ante by including them in plan networks, patients pay far less for those services,

while air ambulances are still generally compensated at a higher rate than they are

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by other payers. For example, testimony before the North Dakota legislature

indicated that charges from out-of-network air ambulance services were on average

240% higher than in-network providers’ charges. See AHIP Issue Brief at 6;

accord MHCC Report at 35 (2005 study showing in-network charges for air

ambulance providers, although substantially higher than Medicare-allowed

amounts, were still significantly less than out-of-network charges). Network

agreements also protect consumers from surprise medical bills for whatever

portion of the service bill is not covered by the health plan, thereby limiting

consumers’ exposure to out-of-pocket costs. 2019 GAO Report at 7; 2017 GAO

Report at 8.

Participation in networks would lower costs for insurance providers and

consumers, and protect consumers from surprise medical bills, all while still

reimbursing air ambulance providers at higher rates than any other market

participant. But because no regulation constrains their ability to send surprise

medical bills or requires them to maintain transparent pricing, most air ambulances

simply opt out. See 2019 GAO Report at 8 (describing lack of incentives to

participate in networks); Missouri Report at 5 (“[M]any air ambulance providers,

particularly providers not affiliated with a hospital, do not participate in insurer

networks and have little incentive to do so.”); MHCC Report at 30–31 (noting that

air ambulance providers cite lower reimbursement rates and requirement to forgo

21

surprise medical billing as reasons for resistance to network participation).

2. The ability to send surprise medical bills and the lack of pricing transparency tip the scales of post-service negotiations in favor of exceptionally high bills for air ambulance services.

The same market and regulatory conditions that allow air ambulance

providers to opt out of plan networks without losing market share also enable them

to extract exorbitant payments in post-service negotiations with insurance

providers. When patients use an air ambulance that is out-of-network, they have no

choice or consent in the matter because network status is (sensibly) not a factor in

air ambulance dispatch. 2019 GAO Report at 7. The out-of-network provider then

typically submits an unsubstantiated and unreasonably high billed charge, and the

insurance provider must engage in post-service negotiations with the air ambulance

provider about how much to pay for the service. See AHIP Out-Of-Network Report

at 2 (a study of out-of-network charges for a variety of procedures (but not

specifically air ambulances) indicated average out-of-network charges ranging

from 118% to 1382% of the Medicare reimbursement rate).

Health insurance providers regularly engage in post-service negotiations

with a wide variety of medical providers. With other emergency services, however,

regulatory guardrails for post-service negotiations foster pricing transparency and

protect patients from surprise medical billing. See Kaiser Family Foundation,

Private Insurance: Surprise Medical Bills (Mar. 2016) (surveying different state

22

approaches to mitigating unfair, excessive out-of-network charges).15 But because

air ambulance providers operate in a regulatory vacuum, they have

disproportionate leverage in such negotiations for several reasons. First, as

described above, very few air ambulance providers are contracted with health

plans, so although one common way to resolve payment of out-of-network services

is to offer the same rate that health plans use for in-network providers, cf. 45

C.F.R. 147.138(b)(3)(i)(A) (using in-network payments as one possible minimum

payment standard for out-of-network emergency services), an insurance provider

may not have in-network air ambulance payments to use as reference points.

Second, very little information is known about air ambulance cost data and

their charges are opaque. 2017 GAO Report at 19-20; NCOIL Minutes at 2-3. Yet

efforts to require even something so basic as a published charge list have been held

invalid under the Airline Deregulation Act. See Valley Med Flight, Inc., 171 F.

Supp. 3d at 942. Consequently, there is a general lack of comparative market data

on what charges are reasonable.

Finally, and most critically, air ambulances can threaten to bill the patient

for any amount not paid by the health plan. 2017 GAO Report at 7. Surprise

medical billing is an especially important driver of unconstrained air ambulance

charges. Insurance providers want to protect their enrollees—who pay insurance

15 Available at https://www.kff.org/private-insurance/issue-brief/surprise-medical-bills/.

23

premiums precisely to avoid unanticipated and financially-devasting medical

costs—from nonetheless being charged outrageous balances. So they often reach

an agreement that will satisfy the air ambulance provider. And they do so even if it

means paying an unsubstantiated charge that is inflated well above what insurance

providers would consider to be the usual and customary charge for the service.

Moreover, air ambulance providers know that surprise medical billing provides

them this negotiating leverage. Members of the industry reported to the GAO that

after sending a surprise medical bill, “they first encourage patients to appeal to

their insurers for increased payment.” 2019 GAO Report at 19; see also 2017 GAO

Report at 18 (noting that a patient receiving a surprise medical bill will frequently

report it to her insurance provider, and that “often” results in a higher payment to

the air ambulance provider). In other words, air ambulance providers have no

qualms about placing the patient in the middle as a means to extract inflated

payments from health insurance providers. This practice would never occur in the

market for commercial air transport—where consumer demand is highly elastic,

customers can readily comparison shop, and there is no insurance provider to

leverage—because a consumer’s need for commercial air travel is both knowable

and controllable and not a risk they insure against.

Despite these critical differences, and the distinct role insurance markets

play in the provision of air ambulance services, state efforts to sensibly address this

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problem have been routinely defeated as preempted by a federal statute meant to

promote competition for commercial airlines. But air ambulances and commercial

airlines are nothing alike. So instead of fostering competition, the result of this

overly broad reading of the preemptive scope of the Airline Deregulation Act has

been to impede competition for air ambulance services.

3. Air ambulances’ refusal to participate in networks and heightened post-service leverage has resulted in skyrocketing costs for insurance providers and consumers.

Because of these anticompetitive dynamics, billed charges and revenue in

this skewed market have soared. The median bill for a fixed-wing transport in 2017

was $40,600—up 60% from $24,900 just five years earlier. 2019 GAO Report at

17. The average bill per transport for the largest air ambulance provider—Air

Methods—increased from $13,000 in 2007 to $49,800 in 2016. 2017 GAO Report

at 11; see also Sarah Gantz, Sky high air ambulance bills leave patients seeking

relief, BALT. BUS. J. (Aug. 28, 2015) (reporting that one air ambulance provider’s

average bill increased to $41,803 in Maryland in 2014, up from $17,796 in 2013).16

And although little data is known—given States’ frustrated attempts to

impose transparency—the few estimates available suggest that these billed charges

far exceed costs. Peter Eavis, Air Ambulances Offer a Lifeline, and Then a Sky-

High Bill, N.Y. TIMES (May 5, 2015) (reporting estimates for the average cost of

16 Available at https://www.bizjournals.com/baltimore/print-edition/2015/08/28/sky-high-air-ambulance-bills-have-patients-seeking.html.

25

each flight ranging from $7,400 to $9,000 or $10,000).17 The district court found

here that Guardian Flight charges private insurance providers—and their

enrollees—far more than their costs in order to cover services provided to others

(i.e., uninsured, Medicare, and Medicaid patients). JA 88 (The “cost of

undercompensated care is shifted to and borne by … commercial insurers and

patients.”). That pattern is widespread. One air ambulance provider informed

reporters that it “routinely charges patients far more than the actual cost for a flight

in order to make up for low government reimbursements” from Medicare,

Medicaid, and similar programs. Cindy Galli et al., Sky-Rage: Bills, Debt, Lawsuits

Follow Helicopter Medevac Trips, ABC NEWS (Mar. 16, 2016)18; see also N.M.

Office of Superintendent of Ins., Air Ambulance Memorial: Study Report, at 5 (Jan.

2017) (air ambulance provider reporting same to state regulator).19

But if the problem is that federal reimbursements are too low, the answer is

surely to press the federal government for higher reimbursements, not to recoup the

federal underpayment by sending inflated surprise medical bills to patients—all the

while aggressively fending off any attempt by States to reasonably regulate air

ambulance payments. Through widespread use of surprise medical bills, high

17 Available at http://www.nytimes.com/2015/05/06/business/rescued-by-an-air-ambulance-but-stunned-at-the-sky-high-bill.html. 18 Available at http://abcnews.go.com/US/sky-rage-bills-debt-lawsuits-follow-helicopter-medevac/story?id=37669153. 19 Available at http://www.osi.state.nm.us/MiscPages/docs/newsroom/ Air%20Ambulance%20Memorial%20-%201.19.17.pdf.

26

payments are often demanded directly from vulnerable consumers who are

recovering from critical medical injuries and illnesses. See Alison Kodjak, Taken

for a Ride, NPR (Sept. 25, 2018) (reporting patient was first called by air

ambulance provider three days after an accident, while he was still in the hospital,

and told “the helicopter ride would most likely cost more than $50,000 and asked

… how he planned to pay”).20 In North Dakota, surprise medical bills as high as

$66,600 are reflected in complaints, 2019 GAO Report at 18, and testimony

presented in the legislature indicated that one health plan experienced more than

160 cases over a twelve-month period where its enrollees were sent surprise bills

for air ambulance services ranging from $20,000 to $30,000, AHIP Issue Brief at

5-6.

North Dakota’s experience is not unique. A recent review of surprise-

medical-billing complaints in Maryland revealed bills ranging from $12,300 to

$52,000. 2019 GAO Report at 18. A study by a Montana legislative committee

found that surprise bills for air ambulances in that state “amounted to $25,000 at

the low end to more than $50,000,” and in one case, more than $100,000. Mont.

State Leg., Final Report of the 2015-2016 Economic Affairs Interim Committee, at

4 (May 2017) (“Montana EAIC Report”). And documents from nine States reveal

that from 2013 to 2016, state “insurance departments reviewed 55 incidences in

20 https://www.npr.org/sections/health-shots/2018/09/25/647531500/taken-for-a-ride-doctor-injured-in-atv-crash-gets-56-603-bill-for-air-ambulance.

27

which consumers complained of $3.8 million in combined charges—an average

charge of $70,000 per trip.” Eric S. Peterson & Brian Maffly, Sky’s the Limit for

What Utah Air Ambulances Can Charge—Like the $46K Bill This Man Received

for a 50-mile Trip, SALT LAKE TRIB. (Aug. 29, 2016).21

Despite insurance providers’ best efforts to negotiate better rates, sky-high

surprise medical bills can still cause numerous difficulties for consumers.

Testimony in Montana indicated that some consumers were forced to sign over

pensions or sign up for long-term payment plans. Montana EIAC Report at 55.

Others must deal with aggressive collection tactics, including use of debt

collectors, threatening letters, wage garnishment, and lawsuits. See Eavis, supra;

Galli, supra. According to a 2016 news report, one air ambulance provider has

filed hundreds of debt collection lawsuits against individual patients over the

previous five years, including 104 lawsuits in South Carolina alone. Galli, supra. A

report from a Missouri agency determined, based on court records, that “[m]any air

ambulance providers have adopted fairly aggressive collection strategies, such as

placing liens on homes or garnishing wages,” reporting over 180 cases involving a

single air ambulance provider over a six-year period, most of which involved

collection efforts. Missouri Report at 6. The widespread harm from such predatory

tactics cries out for sensible regulatory approaches.

21 Available at http://archive.sltrib.com/article.php?id=4139196&itype=CMSID.

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* * * * *

Consumers cannot be protected from these harms without some regulatory

oversight of air ambulance services. And federal advisory studies alone are not

enough. The States have a crucial role to play, as they do for every other type of

emergency medical service. When regulatory guardrails for the relationship

between out-of-network emergency providers and insurance providers are in place,

they help to correct market imbalances and allow insurance markets to operate as

they should—by facilitating health insurance providers’ efforts to compensate

providers fairly while protecting consumers from overwhelming and excessive

charges. And, when staying out-of-network is no longer an invitation to price

gouge, more emergency providers will be encouraged to join networks, rather than

abandon them, allowing insurance providers to better protect consumers and

provide affordable coverage through robust, quality networks. See 2019 GAO

Report at 22 (noting that when Montana passed a law restructuring post-service

negotiations for air ambulance services, “most air ambulance providers [were]

more willing to enter into contract negotiations with insurers” and consumer

complaints decreased). In other words, allowing States to fulfill their consumer

protection and insurance oversight role for the provision of essential medical

services fosters a virtuous cycle that reduces expenditures across the health care

system, benefits and protects consumers, and fairly compensates providers for the

29

costs of the urgently necessary, extremely important services they provide to

patients.

It is nonsensical that this one small piece of the emergency medical service

system—air ambulances—has been placed beyond the scope of the States’

traditional and well-established ability to comprehensively oversee insurance

coverage for emergency medical services. This absence of regulatory oversight,

combined with the highly inelastic demand for emergency medical care and a lack

of other traditional, market-driven restraints on pricing, allows air ambulance

providers to engage in unfair practices that result in increased health care costs for

everyone.

CONCLUSION

The judgment of the district court with respect to the Claims Settlement

Provision, N.D.C.C. § 26.1-47-09(3), should be reversed.

June 14, 2019 Respectfully submitted,

s/Hyland Hunt Julie Simon Miller Thomas M. Palumbo AMERICA’S HEALTH INSURANCE PLANS 601 Pennsylvania Ave. NW South Building, Suite 500 Washington, DC 20004

Hyland Hunt Ruthanne M. Deutsch DEUTSCH HUNT PLLC 300 New Jersey Ave. NW Suite 900 Washington, DC 20001 Tel.: 202-868-6915 Fax: 202-609-8410 Email: hhunt@deutschhunt.com

Attorneys for Amicus Curiae America’s Health Insurance Plans

CERTIFICATE OF COMPLIANCE

The foregoing brief is in 14-point Times New Roman proportional font and

contains 6,261 words, and thus complies with the type-volume limitation set forth

in Rules 29(a)(5) and 32(a)(7)(B) of the Federal Rules of Appellate Procedure.

s/Hyland Hunt Hyland Hunt

June 14, 2019

CERTIFICATE OF SERVICE

I hereby certify that, on June 14, 2019, I served the foregoing brief upon all

counsel of record by filing a copy of the document with the Clerk through the

Court’s electronic docketing system.

s/Hyland Hunt Hyland Hunt